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EXHIBIT 3(b)
STATEMENT OF RESOLUTION
ESTABLISHING
FLEXIBLE MONEY MARKET CUMULATIVE PREFERENCE STOCK (MMP-Registered Trademark-),
SERIES B
OF
TXU CORP.
(LIQUIDATION PREFERENCE $100,000 PER SHARE)
To the Secretary of State
of the State of Texas
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of serial preference stock,
par value $25 per share, and fixing and determining the relative rights and
preferences thereof.
1. The name of the corporation is TXU Corp. (the "Corporation").
2. The following resolution, establishing and designating a series of
serial preference stock, par value $25 per share, and fixing and determining the
relative rights and preferences thereof, was duly adopted by a special committee
of the Board of Directors of the Corporation as of June 15, 2000 pursuant to
authority expressly delegated from the Board of Directors, and was thereby duly
adopted by all necessary action on the part of the Corporation:
RESOLVED, that 3,000 shares of the authorized stock classified as serial
preference stock as provided in Division A of Article VI of the Restated
Articles of Incorporation, as amended, shall constitute the second series of
serial preference stock and are designated "Flexible Money Market Cumulative
Preference Stock (MMP-Registered Trademark-), Series B" (the "Shares"), which
series shall have, in addition to the general terms and characteristics of all
the authorized shares of serial preference stock of the Corporation, the
following distinctive terms and characteristics:
1. DEFINITIONS (1). Unless the context or use indicates another or
different meaning or intent, in this Statement of Resolution the following terms
have the following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate
----------------
-R- Registered Trademark of Lehman Brothers Inc.
(1) Certain additional terms used in this Statement of Resolution are defined
in Paragraphs 1, 2 and 5 hereof.
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bonds are rated "AA" by S&P or "Aa" by Moody's or the equivalent of such rating
by another nationally recognized statistical rating organization, as such rate
is made available on a discount basis or otherwise by the Federal Reserve Bank
of New York for the Business Day immediately preceding such date, or (ii) in the
event that the Federal Reserve Bank of New York does not make available such a
rate, then the arithmetic average of the Interest Equivalent of the rate on
commercial paper placed on behalf of such issuers, as quoted on a discount basis
or otherwise by the Commercial Paper Dealers, to the Auction Agent for the close
of business on the Business Day immediately preceding such date. If the
Commercial Paper Dealers do not quote a rate required to determine the "AA"
Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will
be determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealers. If the number of Dividend Period Days
shall be (i) seven or more but fewer than 49 days, such rate shall be the
Interest Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more
but fewer than 70 days, such rate shall be the Interest Equivalent of the 60-day
rate on such commercial paper; (iii) 70 or more days but fewer than 85 days,
such rate shall be the arithmetic average of the Interest Equivalent of the
60-day and 90-day rates on such commercial paper; (iv) 85 or more days but
fewer than 99 days, such rate shall be the Interest Equivalent of the 90-day
rate on such commercial paper; or (v) 99 or more days but fewer than 183 days,
such rate shall be determined by linear interpolation between the Interest
Equivalents of the 90-day rate and the 180-day rate on such commercial paper.
"Affected Dividend Payment Date" has the meaning set forth in paragraph
2(e).
"Affiliate" means any Person known to the Auction Agent to be controlled
by, in control of, or under common control with, the Corporation.
"Applicable Rate" means, with respect to any Shares for any Dividend
Period therefor, the rate per annum at which cash dividends are payable on such
Shares for such Dividend Period.
"Articles" means the Corporation's Restated Articles of Incorporation, as
amended, on file in the office of the Secretary of State of the State of Texas.
"Auction" means a periodic implementation of the Auction Procedures.
"Auction Agent" means a commercial bank, trust company or other financial
institution selected by the Corporation that has entered into an agreement with
the Corporation to follow the Auction Procedures for the purpose of determining
the Applicable Rate and to act as dividend disbursing agent and/or redemption
agent for the Shares.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 5.
"beneficial ownership" or "beneficially own" shall have the meanings
ascribed to them under Rule 13d-3 under the Securities Exchange Act and
"beneficial owner" shall have a corollary meaning.
"Board of Directors" means the Board of Directors of the Corporation or
any duly authorized committee thereof.
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"Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 5, that has
been selected by the Corporation and has entered into a Broker-Dealer Agreement
with the Auction Agent that remains effective.
"Broker-Dealer Agreement" means an agreement between the Auction Agent
and one or more Broker-Dealers pursuant to which each such Broker-Dealer agrees
to follow the procedures specified in paragraph 5 of this Statement of
Resolution.
"Business Day" means a day on which the New York Stock Exchange, Inc. is
open for trading and which is not a Saturday, Sunday or other day on which banks
in Dallas, Texas or New York, New York are authorized or obligated by law to
close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealer" or "Commercial Paper Dealers" means such
commercial paper dealer or dealers as the Corporation may from time to time
appoint, or, in lieu of any thereof, their respective affiliates or successors.
"Common Stock" means the common stock, without par value, of the
Corporation.
"Corporation" means TXU Corp., a Texas corporation, and its successors.
"Cumulative Parity Preference Stock" has the meaning set forth in
paragraph 5(b).
"Date of Original Issue" means, with respect to the Shares, the date on
which the Corporation originally issues such Shares.
"Dividend Non-Payment Period" has the meaning set forth in paragraph
2(b)(iii)(B).
"Dividend Payment Date," with respect to the Shares, includes each
Initial Dividend Payment Date, Subsequent Dividend Payment Date and Period-End
Dividend Payment Date.
"Dividend Period," with respect to the Shares, includes the Initial
Dividend Period and each Subsequent Dividend Period.
"Dividend Period Days," with respect to any Dividend Period, means the
calendar days included in such Dividend Period.
"Dividends Received Percentage" means the percentage of dividends
received by corporate taxpayers which may be deducted for federal income tax
purposes pursuant to Section 243(a)(1) of the Code (or any successor provision).
"DRD Formula" means the amount derived from the following fraction:
1 - [.35(1-.70)]
1 - [.35(1-DRP)]
"DRD Gross-Up Provisions" has the meaning set forth in paragraph 2(e).
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"DRP," as used in computing the DRD Formula, means the Dividends Received
Percentage, measured as a fraction, applicable to the dividend in question;
provided, however, that DRP shall in no event be less than .50.
"Existing Holder," with respect to the Shares, means a Person who is
listed as the owner of such Shares in the Stock Books.
"Holder" or "holder," with respect to any Shares, means the record holder
thereof.
"IRS" means the Internal Revenue Service.
"Initial Dividend Payment Dates," with respect to the Shares, means each
March 15, June 15, September 15 and December 15 of each year during the Initial
Dividend Period, commencing September 15, 2000.
"Initial Dividend Period," with respect to the Shares, means the period
from and including the Date of Original Issue for the Shares to but excluding
the Initial Period-End Dividend Payment Date for the Shares.
"Initial Dividend Rate," with respect to the Shares, means 7.24% per
annum for the Initial Dividend Period for the Shares.
"Initial Period-End Dividend Payment Date," with respect to the Shares,
means June 15, 2005.
"Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Maximum Applicable Rate" has the meaning set forth in paragraph
5(a)(vi).
"Minimum Holding Period" means, at the time of reference thereto, the
minimum holding period then required for corporate taxpayers to be entitled to
the dividends received deduction set forth in Section 243(a)(1) of the Code.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Non-Call Period," with respect to the Shares, means a specified portion
or the entirety of a Special Dividend Period for the Shares during which the
Shares shall not be subject to Optional Redemption, as selected by the
Corporation pursuant to a Notice of Special Dividend Period.
"Non-Payment Period" includes any Dividend Non-Payment Period and
Redemption Non-Payment Period.
"Non-Payment Period Rate," with respect to the Shares, means 275% of the
Reference Rate applicable to such Shares.
"Notice of Redemption" means a written notice of redemption given
pursuant to paragraph 4.
"Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii).
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"Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii).
"Optional Redemption" means an optional redemption of Shares by the
Corporation pursuant to paragraph 4(a)(i) or 4(a)(ii).
"Optional Redemption Date" means the Dividend Payment Date selected by
the Corporation for an Optional Redemption, which is at least 20 days but not
more than 50 days after delivery of a Notice of Redemption with respect to such
Optional Redemption.
"Outstanding" means, as of any date, (i) with respect to the Shares, the
Shares theretofore issued by the Corporation except, without duplication, (A)
any Shares theretofore cancelled, or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and the full amount payable upon such
redemption shall have been deposited in trust by the Corporation with
irrevocable payment instructions given pursuant to paragraph 4(c), provided that
Shares as to which a Notice of Redemption has been given by the Corporation
shall be deemed to be not Outstanding for purposes of any Auction for such
Shares held subsequent to the date of such Notice of Redemption and (B) any
Shares as to which the Corporation or any Affiliate shall be an Existing Holder
or beneficial owner and (ii) with respect to shares of other Preference Stock,
has the equivalent meaning.
"Parity Preferred" means, with respect to the Shares, each other
Outstanding series of Preference Stock the holders of which, together with the
Holders of the Shares, shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up of the
Corporation, as the case may be, in proportion to the full respective
preferential amounts to which they are entitled, without preference or priority
of one over the other.
"Participant" means a participant of the Securities Depository that will
act on behalf of an Existing Holder, a beneficial owner, or a Potential Holder
or potential beneficial owner of one or more Shares.
"Period-End Dividend Payment Dates" include the Initial Period-End
Dividend Payment Date and each Subsequent Period-End Dividend Payment Date.
"Person" means and includes an individual, a partnership, a corporation,
a trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
"Potential Holder" means any Person who is not an Existing Holder but who
may be interested in acquiring Shares, or who is an Existing Holder but who
wishes to acquire additional Shares.
"Preference Stock" means any preference stock of the Corporation,
including the Shares, that the Board of Directors has authority to issue under
the Articles.
"Redemption Non-Payment Period" has the meaning set forth in paragraph
2(b)(iv)(C)(1).
"Reference Rate" means, (i) with respect to a Dividend Period of 49 days
to 183 days, the applicable "AA" Composite Commercial Paper Rate, (ii) with
respect to a Dividend Period of
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184 days to 364 days, the applicable U.S. Treasury Bill Rate, (iii) with
respect to a Dividend Period of one year to ten years, the applicable U.S.
Treasury Note Rate, and (iv) with respect to a Dividend Period in excess of
ten years, the applicable U.S. Treasury Bond Rate.
"Regular Dividend Period" means a Subsequent Dividend Period consisting
of 49 days as the same may be adjusted from time to time pursuant to paragraph
2(b)(i) in connection with the requirement of, or a change of law altering the
requirements of, the Minimum Holding Period, but in no event exceeding 98 days.
"Retroactive Dividends" has the meaning set forth in Section 2(e).
"S&P" means Standard & Poor's Ratings Services or its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Depository" means The Depository Trust Company or any
successor corporation or other entity elected by the Corporation as securities
depository for the Shares that agrees to follow the procedures required to be
followed by such securities depository in connection with the Shares.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Share Books" means the books maintained by the Transfer Agent setting
forth at all times a current list, as determined by the Transfer Agent, of
Existing Holders.
"Shares" means the shares of Preference Stock, par value $25 per share,
liquidation preference $100,000 per share, plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared), designated as the
"Flexible Money Market Cumulative Preference Stock (MMP-Registered Trademark-),
Series B," of the Corporation.
"Special Dividend Period" means a Subsequent Dividend Period consisting
of at least 49 days as selected by the Corporation pursuant to a Notice of
Special Dividend Period, to the extent that such selection by the Corporation
shall be available pursuant hereto and subject to adjustment from time to time
pursuant to paragraph 2(b)(i) in connection with the requirements of, or a
change of law altering requirements of, the Minimum Holding Period.
"Subsequent Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i).
"Subsequent Dividend Period" has the meaning set forth in paragraph
2(c)(i).
"Subsequent Period-End Dividend Payment Date," with respect to each
Subsequent Dividend Period, means the Business Day immediately succeeding the
last day of such Subsequent Dividend Period.
"Substitute Commercial Paper Dealer" or "Substitute Commercial Paper
Dealers" means such substitute Commercial Paper Dealer or substitute Commercial
Paper Dealers as the Corporation may from time to time appoint or, in lieu of
any thereof, their respective affiliates or successors.
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"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization and two nationally
recognized statistical rating organizations, respectively, each term as defined
for purposes of Rule 436(g)(2) under the Securities Act, selected by the
Corporation after consultation with each Broker-Dealer, to act as the substitute
rating agency or substitute rating agencies, as the case may be, to determine
the credit ratings of the Shares.
"Sufficient Clearing Bids" has the meaning as defined in paragraph 5(a).
"Transfer Agent" means an commercial bank, trust company, other financial
institution or other corporation selected by the Corporation that has entered
into an agreement with the Corporation to act as transfer agent and registrar
for the Shares.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent
of the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate"
on any date means the Interest Equivalent of the yield as calculated by
reference to the arithmetic average of the bid price quotations of the actively
traded Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
"U.S. Treasury Bond Rate" on any date means (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Bond with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate"
on any date means the yield as calculated by reference to the arithmetic average
of the bid price quotations of the actively traded, current coupon Treasury Bond
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate"
on any date means the yield as calculated by reference to the arithmetic average
of the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day
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immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
2. DIVIDENDS. (a) The holders of Shares shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available therefor, cumulative cash dividends at the Applicable Rate determined
as set forth in paragraph 2(c), payable on the respective Dividend Payment Dates
for the Shares.
(b) (i) Dividends on Shares shall accumulate (whether or not earned
or declared) at the Applicable Rate for such Shares from the Date of Original
Issue and shall be payable, when, as and if declared by the Board of Directors,
out of funds legally available therefor, on each Initial Dividend Payment Date
for the Shares and on the Initial Period-End Dividend Payment Date for the
Shares.
Following the Initial Period-End Dividend Payment Date for the Shares,
dividends on the Shares will be payable on each Subsequent Period-End Dividend
Payment Date, and in addition, (A) with respect to any Subsequent Dividend
Period of 100 days to 190 days, on the 91st day, (B) with respect to any
Subsequent Dividend Period of 191 days to 281 days, on the 91st and 182nd days,
(C) with respect to any Subsequent Dividend Period of 282 days to 364 days, on
the 91st, 182nd and 273rd days, and (D) with respect to any Subsequent Dividend
Period of one year or longer, on March 15, June 15, September 15 and December 15
of each year (each such date referred to in clause (A) through (D) above being
herein referred to as a "Subsequent Dividend Payment Date"). Notwithstanding
the foregoing, if any Dividend Payment Date is not a Business Day then such
Dividend Payment Date shall be the immediately succeeding Business Day.
Notwithstanding the foregoing, if any date on which dividends on the
Shares would be payable as described in the immediately preceding paragraph is a
day that would result in the number of Dividend Period Days in the then current
Dividend Period for the Shares not being at least equal to the then current
Minimum Holding Period, then dividends with respect to such Dividend Period
shall be payable on the first Business Day following such date on which
dividends would be so payable that results in the number of Dividend Period Days
in such Dividend Period being at least equal to the Minimum Holding Period or,
if earlier, the 98th day of such Dividend Period. Moreover, notwithstanding the
foregoing, in the event of a change in law altering the Minimum Holding Period,
the Board of Directors shall adjust, if necessary, the number of Dividend Period
Days in each Regular Dividend Period and the minimum number of days of each
Special Dividend Period commencing after the date of such change in law to equal
or exceed the Minimum Holding Period, provided that the number of Dividend
Period Days in a Regular Dividend Period shall not exceed by more than nine days
the length of the Minimum Holding Period and shall be evenly divisible by seven,
and the maximum number of Dividend Period Days in a Regular Dividend Period and
the minimum number of Dividend Period Days in a Special Dividend Period, as
adjusted pursuant hereto, shall in no event exceed 98 days.
Upon any change in the number of Dividend Period Days in any then current
Dividend Period or in a Regular Dividend Period or Special Dividend Period as a
result of a change in the Minimum Holding Period, the Corporation will mail
notice of such change to all holders of record of Shares. Although any
particular Dividend Payment Date for the Shares may not occur on the day of the
week or the date originally scheduled as a Dividend Payment Date for the
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Shares because of the adjustments set forth above, each succeeding Dividend
Payment Date for the Shares shall occur, subject to such adjustments, on the
day of the week or the date originally scheduled as a Dividend Payment Date
for the Shares as if each preceding Dividend Payment Date had occurred on
such day of the week or date.
(ii) On or prior to any Dividend Payment Date for the Shares, the
Corporation shall pay to the Auction Agent sufficient funds for the payment in
full of all accumulated dividends with respect to the Shares payable on such
Dividend Payment Date. Each dividend shall be paid to the holder or holders of
the Shares as they appear on the Stock Books of the Corporation on the date
which is 10 days prior to the applicable Dividend Payment Date.
Dividends in arrears in respect of Shares for any past Dividend Period
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to the holder or holders of such Shares as they appear on the
Stock Books on a date, not exceeding 15 days prior to the payment date therefor,
as may be fixed by the Board of Directors. Any dividend payment made on the
Shares shall be applied, without duplication, in the following order of
priority:
FIRST, in or toward payment of all accumulated dividends
with respect to such earliest Dividend Period for such
Shares for which dividends have not been paid; and
SECOND, in or toward payment of all then accumulated
dividends with respect to each succeeding Dividend Period
for such Shares for which dividends have not been paid.
(iii) If the Corporation fails to pay to the Auction Agent on or prior
to any Period-End Dividend Payment Date for the Shares the full amount of all
accumulated and unpaid dividends payable on the Shares on such Period-End
Dividend Payment Date, then:
(A) if such failure to pay is cured as provided below, the
Applicable Rate for the Shares for the Dividend Period commencing on the
Period-End Dividend Payment Date on which the Corporation failed to pay
shall be equal to the dividend rate determined on the Auction Date
immediately preceding such Period-End Dividend Payment Date; and
(B) if such failure to pay is not cured as provided below,
then, for the period (the "Dividend Non-Payment Period") commencing on
and including such Period-End Dividend Payment Date and ending on and
including the Business Day on which, by 12:00 noon, New York City time,
all unpaid cash dividends shall have been deposited with the Auction
Agent or otherwise made available for payment to the applicable Holders
in same day funds (provided that, at least two Business Days but no more
than 30 days prior to such Business Day, the Corporation shall have given
the Auction Agent, the Securities Depository and the applicable Holders
written notice of such deposit or availability):
(1) each Subsequent Dividend Period shall be a Regular
Dividend Period (regardless of any Special Dividend Period
election made by the Corporation) and Auctions for the Shares
shall be suspended and shall not resume, in each case until all
accumulated and unpaid dividends on the Shares for
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all past Dividend Periods shall have been paid to the Auction
Agent, not later than the second Business Day immediately
preceding an Auction Date for the Shares; and
(2) the Applicable Rate for the Shares during such
Dividend Non-Payment Period shall be equal to Non-Payment Period
Rate for the Shares.
(iv) If the Corporation fails to pay to the Auction Agent on or prior
to any date set for redemption of less than all of the Shares the full amount
payable upon redemption of the Shares called for redemption, then:
(A) Auctions for the Shares shall be suspended and shall not
resume until all amounts payable upon the redemption of the Shares called
for redemption shall have been paid to the Auction Agent not later than
the second Business Day immediately preceding an Auction Date for the
Outstanding Shares;
(B) if such failure to pay is cured as provided below, the
Applicable Rate for the Shares for the Dividend Period commencing after
the redemption date on which the Corporation failed to pay shall be equal
to the Maximum Applicable Rate for the Shares (as determined on the
Business Day immediately preceding the first day of such Dividend Period)
and such Dividend Period shall be a Regular Dividend Period (regardless
of any Special Dividend Period election made by the Corporation), unless
on the Auction Date for such Dividend Period, Auctions for the Shares may
be resumed as provided in clause (A) above; and
(C) if such failure to pay is not cured as provided below,
then:
(1) each Subsequent Dividend Period shall be a Regular
Dividend Period (regardless of any Special Dividend Period
election made by the Corporation) and the Applicable Rate for the
Shares not called for redemption for each Dividend Period,
commencing on the date immediately succeeding the redemption date
on which the Corporation failed to pay, to but excluding the
Dividend Period, if any, next succeeding the Auction Date on which
Auctions for the Shares may be resumed as provided in clause (A)
above (the "Redemption Non-Payment Period"), shall be equal to the
Non-Payment Period Rate for the Shares (as determined on the
Business Day immediately preceding the first day of each such
Dividend Period); and
(2) the Applicable Rate for the Shares called for
redemption for each Dividend Period for the Shares commencing on
the date immediately succeeding the redemption date on which the
Corporation failed to pay shall be equal to the Non-Payment Period
Rate for the Shares (as determined on the Business Day immediately
preceding the first day of each such Dividend Period).
For purposes of paragraphs 2(b)(iii)(A) and 2(b)(iv)(B), any such failure
to pay with respect to the Shares shall be deemed cured if, not later than 12:00
noon, New York City time, on the third Business Day immediately succeeding such
failure to pay, there shall have been paid to the Auction Agent (i) all
accumulated and unpaid dividends on the Shares including the full amount of any
dividends to be paid on the Period-End Dividend Payment Date with respect to
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which such failure to pay occurred but excluding amounts accumulated after such
Period-End Dividend Payment Date, plus additional dividends in an amount
computed by multiplying (A) the Non-Payment Period Rate for the Shares (as
determined on the Business Day immediately preceding such Dividend Payment Date)
by (B) a fraction, the numerator of which shall be the number of days in respect
of which such failure to pay is not cured in accordance herewith (including the
day such failure to pay occurs and excluding the day such failure to pay is
cured) and the denominator of which is 360, and multiplying the rate so obtained
by the product of $100,000 and the number of Shares then Outstanding and (ii)
the full amount payable upon redemption of the Shares called for redemption that
have not been so redeemed, plus (except to the extent such amount has been paid
pursuant to paragraph 2(b)(iv)(A) above) an amount computed by multiplying (X)
the Non-Payment Period Rate for the Shares (as determined on the Business Day
immediately preceding the first day of the current Dividend Period), by (Y) a
fraction, the numerator of which shall be the number of days for which such
failure to pay is not cured in accordance herewith (including the day such
failure to pay occurs and excluding the day such failure to pay is cured) and
the denominator of which is 360, and multiplying the rate so obtained against
the product of $100,000 and the number of Shares called for redemption that have
not been so redeemed.
If the Corporation fails to pay the Auction Agent on or prior to any date
for redemption of all the Shares the full amount payable upon such redemption of
the Shares, then the Applicable Rate for the Shares for each Dividend Period or
portion thereof commencing on or after the redemption date on which the
Corporation failed to pay shall be equal to the Non-Payment Period Rate for the
Shares (as determined on the Business Day immediately preceding the first day of
each such Dividend Period).
(c) (i) During the Initial Dividend Period, the Applicable Rate for
the Shares shall be the Initial Dividend Rate. Commencing on the Initial
Period-End Dividend Payment Date for the Shares, the Applicable Rate for the
Shares for the period commencing on and including the Initial Period-End
Dividend Payment Date and ending on and including the calendar day immediately
preceding the immediately succeeding Subsequent Period-End Dividend Payment Date
and for each period thereafter commencing on and including each Subsequent
Period-End Dividend Payment Date and ending on and including the calendar day
immediately preceding to the immediately succeeding Subsequent Period-End
Dividend Payment Date (each such period being herein referred to as a
"Subsequent Dividend Period"), shall be equal to the rate per annum that results
from implementation of the Auction Procedures with respect to Shares as the
Auction Agent advises the Corporation following the conclusion of the Auction
for such Shares.
Each Subsequent Dividend Period shall be a Regular Dividend Period unless
the Corporation has duly selected a Special Dividend Period with respect thereto
pursuant to paragraph 2(c)(iii) and such selection is available hereunder. In
the event that Sufficient Clearing Bids have not been made in any Auction under
paragraph 5, then the immediately succeeding Subsequent Dividend Period shall
automatically be a Regular Dividend Period regardless of whether the Corporation
has elected a Special Dividend Period.
In the event that an Auction for any Subsequent Dividend Period with
respect to the Shares is not held for any reason (other than as a result of the
existence and continuance of a Non-Payment Period), such Subsequent Dividend
Period next succeeding the originally
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<PAGE>
scheduled Auction shall automatically be a Regular Dividend Period and the
Applicable Rate for such Subsequent Dividend Period shall be equal to the
Maximum Applicable Rate on the Business Day immediately preceding the
commencement of such Subsequent Dividend Period.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate, and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a Regular Dividend Period regardless of any election made by
the Corporation for a Special Dividend Period relating thereto.
(ii) During the Initial Dividend Period and any Special Dividend Period
in excess of 364 days in duration, the amount of dividends accumulated and
payable, if declared, on each share for each period that begins on a Dividend
Payment Date and ends on the day immediately preceding the immediately
succeeding Dividend Payment Date shall be computed by (A) multiplying the
Applicable Rate for such Dividend Period by 25% and (B) multiplying $100,000 by
the rate so obtained.
The amount of dividends accumulated and payable, if declared, on each
Share on any Dividend Payment Date with respect to any Regular Dividend Period
and any period during the Initial Dividend Period and any Special Dividend
Period in excess of 364 days that is not set forth in clause (A) above will be
computed by (X) multiplying the Applicable Rate for such Dividend Period by a
fraction, the numerator of which is the actual number of days in the portion of
such Dividend Period prior to such Dividend Payment Date as to which dividends
have not been paid and the denominator of which is 360, and (Y) multiplying
$100,000 by the rate so obtained.
(iii) The Corporation may, at its option and to the extent permitted by
law, by written notice (a "Notice of Special Dividend Period") to the Auction
Agent and each Holder of the Shares, request that the next succeeding Dividend
Period for the Shares be a number of days, at least as long as the Minimum
Holding Period, specified in such notice, provided that such Notice of Special
Dividend Period shall be null and void if Sufficient Clearing Bids have not been
made in the relevant Auction and the Corporation may not again give a Notice of
Special Dividend Period for the Shares (and any such attempted notice shall be
null and void) until Sufficient Clearing Bids have been made in an Auction with
respect to the Shares. Such Notice of Special Dividend Period shall be
delivered or sent by the Corporation, by first-class mail, postage prepaid, to
each Holder of the Shares, not less than 10 days nor more than 60 days prior to
the Auction for the relevant Subsequent Dividend Period. A Notice of Special
Dividend Period with respect to the Shares will specify (A) the Corporation's
determination of the length of the Special Dividend Period (which shall be equal
to or longer than the Minimum Holding Period), (B) in the case of any Special
Dividend Period in excess of 99 days in duration, any Subsequent Dividend
Payment Date or Dates other than the Subsequent Period-End Dividend Payment Date
for such Dividend Period, (C) if the Corporation has elected that the Shares
will be subject to a Non-Call Period during such Special Dividend Period, a
statement to that effect, (D) if the Corporation has elected that the DRD
Gross-Up Provisions shall apply during such Special Dividend Period, a
statement to that effect, and (E) if the Corporation has elected to have the
option to redeem the Shares during such Special Dividend Period in accordance
with paragraph 4(a)(ii), a statement to that effect. If the Corporation has
given a Notice of Special Dividend Period, the Corporation may withdraw such
election by giving telephonic and written notice of
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<PAGE>
its revocation (a "Notice of Revocation") to each Holder of the Shares by no
later than 3:00 P.M., New York City time, on the Business Day immediately
preceding the date of the Auction with respect to which such Notice of
Special Dividend Period and Notice of Revocation were delivered, and in such
event such election by the Corporation of a Special Dividend Period shall be
of no force and effect. The Corporation shall deliver, or cause to be
delivered, physically, by telecopier or by other written electronic
communication, copies of each Notice of Special Dividend Period and each
Notice of Revocation to the Auction Agent at the same time such notices are
transmitted to the Holders of the Shares. In the event that the Corporation
has effectively revoked its election of a Special Dividend Period for the
Shares as described above, the next succeeding Dividend Period for the Shares
shall be a Regular Dividend Period. No defect in a Notice of Special
Dividend Period or in the mailing thereof shall affect the validity of any
change in any Dividend Period.
(d) (i) Except as provided in this Statement of Resolution, Holders
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as herein provided, on any
Shares, and no interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment on any Shares that may be in arrears.
(ii) So long as any Shares are Outstanding, no dividend (other than a
dividend in Common Stock and other than as provided in paragraph 2(d)(iii))
shall be declared or made upon any Parity Preferred, the Common Stock or any
other shares of capital stock of the Corporation ranking junior to the Shares as
to dividends or upon liquidation, nor shall any Parity Preferred, Common Stock
or any other shares of capital stock of the Corporation ranking junior to the
Shares as to dividends or upon liquidation, be redeemed, purchased or otherwise
acquired for any consideration (nor shall any funds be paid to, or made
available for, a sinking fund for the redemption of any shares of such stock) by
the Corporation (except by conversion into or exchange for Common Stock or
shares of capital stock of the Corporation ranking junior to the Shares as to
dividends or upon liquidation) unless, in each case, the full cumulative
dividends on the Outstanding Shares shall have been or contemporaneously are,
paid, or declared and a sum sufficient for the payment thereof has been or is
set apart for such payment.
(e) If, at any time prior to the date that is 18 months after the Date
of Original Issue, any amendment to the Code shall have been enacted that has
the effect of changing the Dividends Received Percentage, then the Applicable
Rate with respect to such Shares for the Dividend Period in which the effective
date of such amendment to the Code occurs will, to the extent that such
amendment applies to such Dividend Period, be adjusted on and after such
effective date for the remainder of such Dividend Period by multiplying the
Applicable Rate (determined before such adjustment) by the DRD Formula and
rounding the result to the nearest basis point. No amendment to the Code, other
than a change in the percentage of the dividends received deduction set forth in
Section 243(a)(1) of the Code or any successor provision which is enacted prior
to 18 months after the Date of Original Issue, will give rise to an adjustment.
Notwithstanding the foregoing provisions, in the event that, with respect to any
such amendment, the Corporation shall receive either (1) an unqualified opinion
of independent recognized tax counsel based upon the legislation amending or
establishing the DRP or upon a published pronouncement of the IRS addressing
such legislation or (2) a private letter ruling or similar form of assurance
from the IRS, in either case to the effect that such an amendment would not
apply to dividends payable on the Shares, then any such amendment shall not
result in the adjustment provided for pursuant to the DRD Formula. The
Corporation's calculation of the
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<PAGE>
dividends payable, as so adjusted and as certified accurate as to calculation
and reasonable as to method by the independent certified public accountants
then regularly engaged by the Corporation, shall be final and not subject to
review. Notwithstanding the foregoing, in no event shall the Applicable Rate
for any Dividend Period, if and as adjusted from time to time as set forth
above, be more than the Maximum Applicable Rate as of the Date of Original
Issue of the Shares or the date of the preceding Auction, as the case may be.
If any such amendment to the Code which reduces the Dividends Received
Percentage is enacted and becomes effective after a dividend payable on a
Dividend Payment Date has been declared but before such dividend has been paid,
the amount of dividends payable on such Dividend Payment Date shall not be
increased; but instead, an amount equal to the excess, if any, of (x) the
product of the dividends paid by the Corporation on such Dividend Payment Date
and the DRD Formula (where the DRP used in the DRD Formula would be equal to the
greater of the reduced Dividends Received Percentage or 50%) less (y) the
dividends paid by the Corporation on such Dividend Payment Date, will be payable
(if declared) on the next succeeding Dividend Payment Date to Holders of the
Shares for such succeeding Dividend Payment Date, in addition to any other
amounts payable on such Dividend Payment Date.
If the Applicable Rate shall have been adjusted pursuant to the
provisions of this paragraph 2(e) (the "DRD Gross-Up Provisions"), the
Corporation shall send notice of such adjustment to each Holder of the Shares
and the Auction Agent on or prior to the next succeeding Dividend Payment Date
for the Shares.
Unless otherwise required by the context, any reference in this Statement
of Resolution to dividends shall mean dividends adjusted pursuant to the DRD
Gross-Up Provisions. The DRD Gross-Up Provisions shall apply at any time prior
to the date ending 18 months after the Date of Original Issue. After such date,
the DRD Gross-Up Provisions shall not apply to any Regular Dividend Period and
shall only apply to any Special Dividend Period for the Shares if so specified
by the Board of Directors in the applicable Notice of Special Dividend Period.
In addition, if any such amendment to the Code is enacted that reduces
the Dividends Received Percentage and such reduction retroactively applies to a
Dividend Payment Date as to which the Corporation previously paid dividends on
the Shares (each, an "Affected Dividend Payment Date"), the Corporation will pay
(if declared) additional dividends (the "Retroactive Dividends") on the
immediately succeeding Dividend Payment Date (or if such amendment is enacted
after the dividend payable on such Dividend Payment Date has been declared, on
the second immediately succeeding Dividend Payment Date following the date of
enactment), to Holders of the Shares for such succeeding Dividend Payment Date,
in an amount equal to the excess, if any, of (x) the product of the dividends
paid by the Corporation on each Affected Dividend Payment Date and the DRD
Formula (where the DRP used in the DRD Formula would be equal to the greater of
the reduced Dividends Received Percentage and 50%, applied to each Affected
Dividend Payment Date) over (y) the dividends paid by the Corporation on each
Affected Dividend Payment Date.
Retroactive Dividends will not be paid in respect of the enactment of any
amendment to the Code if such amendment would not result in an adjustment due to
the Corporation having received either an opinion of counsel or tax ruling
referred to above. The Corporation will only make one payment of Retroactive
Dividends.
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<PAGE>
No adjustments in the dividends payable by the Corporation will be made,
and no Retroactive Dividends will be payable by the Corporation, because of any
amendment to the Code effective at any time after 18 months following the Date
of Original Issue that reduces the Dividends Received Percentage.
In the event that the amount of dividends payable per share of the Shares
shall be adjusted pursuant to the DRD Formula and/or Retroactive Dividends are
to be paid, the Corporation will cause notice of each such adjustment and, if
applicable, any Retroactive Dividends, to be sent to each Holder of the Shares.
(f) No fractional Share shall be issued.
3. LIQUIDATION PREFERENCE. The amount payable upon the Shares in the
event of voluntary or involuntary dissolution, liquidation or winding up of the
Corporation shall be $100,000 per share plus an amount equivalent to the accrued
and unpaid dividends thereon, if any, to the date of such voluntary or
involuntary dissolution, liquidation or winding up.
4. REDEMPTION. (a) The Shares shall be redeemable by the Corporation
as provided below:
(i) Upon giving a Notice of Redemption with respect to an Optional
Redemption to the Auction Agent, the Securities Depository and each holder of
record of the Shares, the Corporation at its option may redeem the Shares, in
whole or from time to time in part, out of funds legally available therefor, at
a redemption price per Share of $100,000, on an Optional Redemption Date;
provided that the Board of Directors shall have declared and shall pay on the
redemption date all accumulated and unpaid dividends in respect of such Shares
through the redemption date (whether earned or declared); and provided, further,
that subject to Section 5(a)(ii) below, no Share may be redeemed at the option
of the Corporation during (A) the Initial Dividend Period for the Shares or (B)
a Non-Call Period to which such Shares are subject. Pursuant to such right of
Optional Redemption, the Corporation may elect to redeem all or less than all of
the Shares without redeeming the remaining Shares. Notwithstanding the
foregoing, the Corporation may not give a Notice of Redemption relating to, or
redeem pursuant to, an Optional Redemption as described in this paragraph
4(a)(i) if any dividend on any Share is in arrears unless all Outstanding Shares
are simultaneously redeemed. So long as any dividend on any Share in arrears
remains unpaid, the Corporation shall not purchase or otherwise acquire any
Shares; provided that the foregoing shall not prevent the purchase or
acquisition of Shares pursuant to an otherwise lawful purchase or exchange offer
made on the same terms to the holders of all Outstanding Shares.
(ii) If at any time prior to the date that is 18 months after the Date
of Original Issue, and, during any Special Dividend Period, if designated by the
Corporation and specified in the applicable Special Dividend Period Notice, one
or more amendments to the Code are enacted that reduce the Dividends Received
Percentage to 50% or less, and, as a result, the amount of dividends on the
Shares payable on any Dividend Payment Date may be adjusted upwards pursuant to
paragraph 2(e) hereof, the Corporation at its option may redeem all, but not
less than all, of the Outstanding Shares, provided that, within 60 days of the
date on which an amendment to the Code is enacted that reduces the Dividends
Received Percentage to 50% or less, the Corporation sends notice to the holders
of the Shares of such redemption. Any redemption of the
15
<PAGE>
Shares pursuant to this paragraph 4(a)(ii) will take place on the date
specified in the notice, which will be not less than 20 nor more than 50 days
from the date such notice is sent to the holders of the Shares. Any such
redemption of the Shares will be at a redemption price of $105,000 per Share,
plus all accumulated and unpaid dividends (whether or not declared and
including any increase in dividends payable due to changes in the Dividends
Received Percentage).
(b) In the event that less than all the Outstanding Shares are to be
redeemed and there is more than one Holder, the number of Shares to be redeemed
shall be determined by the Board of Directors and communicated to the Auction
Agent; and, if the Securities Depository or its nominee is the Holder of all
such Shares, the Securities Depository will determine the number of Shares to be
redeemed from the account of each Participant. Each Participant will determine
the number of Shares to be redeemed from the account of each Holder for which it
acts as agent and, if neither the Securities Depository nor its nominee is the
Holder of all such Shares, the particular Shares to be redeemed shall be
selected by the Corporation ratably or by lot, provided that adjustments may be
made by the Corporation with respect to the number of Shares to be redeemed from
each Holder to avoid redemption of fractional Shares.
(c) Whenever Shares are to be redeemed pursuant to an Optional
Redemption, the Notice of Redemption shall be delivered or mailed by first-class
mail, postage prepaid, not less than 20 nor more than 50 days prior to the date
fixed for such Optional Redemption, to each Holder of such Shares to be redeemed
and the Auction Agent.
The Notice of Redemption shall set forth (i) the redemption date, (ii)
the amount of the redemption price, (iii) the aggregate number of Shares to be
redeemed, (iv) the place where Shares are to be surrendered for payment of the
redemption price, (v) a statement that dividends on the Shares to be redeemed
shall cease to accumulate on such date that the Corporation pays the full amount
payable upon redemption of such Shares, and (vi) the provision of this Statement
of Resolution pursuant to which such redemption is being made. A Notice of
Redemption, once given, is irrevocable. No defect in the Notice of Redemption
or in the mailing thereof shall affect the validity of the redemption
proceedings, except as required by applicable law.
If the Corporation gives or causes to be given a Notice of Redemption,
timely pays to the Auction Agent a sum sufficient to redeem the Shares as to
which such Notice of Redemption has been given and gives the Auction Agent
irrevocable instructions and authority to pay the full amount payable on
redemption of such Shares to the Holders of such Shares, then on the date of
such payment, all rights of the Holders of the Shares to be redeemed, as such,
will terminate (except the right of the Holders of such Shares to receive the
full amount payable upon redemption thereof upon surrender of the certificate or
certificates therefor, but without interest) and such Shares will no longer be
deemed to be Outstanding for any purpose (including, without limitation, the
right of Holders of such Shares to vote on any matter or to participate, with
respect to such Shares, in any subsequent Auction for the Outstanding Shares).
In addition, any Shares as to which a Notice of Redemption has been given by the
Corporation will be deemed to be not Outstanding for purposes of any Auction for
the Shares held subsequent to the date of such Notice of Redemption. The
Corporation will be entitled to receive from time to time from the Auction Agent
the income, if any, derived from the investment of monies or other assets paid
to it (to the extent that such income is not required to pay the redemption
price of the Shares to
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<PAGE>
be redeemed), and the holders of any Shares to be redeemed will not have any
claim to such income.
(d) So long as the Shares are held of record by the nominee of the
Securities Depository, the amounts payable upon an Optional Redemption shall be
paid to such nominee of the Securities Depository on the Optional Redemption
Date for the Shares.
5. AUCTION PROCEDURES. (a) CERTAIN DEFINITIONS. As used in this
paragraph 5, the following terms shall have the following meanings, unless the
context otherwise requires:
(i) "Auction Date" means the first Business Day preceding the first
day of each Subsequent Dividend Period.
(ii) "Available Shares" has the meaning specified in paragraph 5(d)(i)
below.
(iii) "Bid" has the meaning specified in paragraph 5(b)(i) below.
(iv) "Bidder" has the meaning specified in paragraph 5(b)(i) below.
(v) "Hold Order" has the meaning specified in paragraph 5(b)(i) below.
(vi) "Maximum Applicable Rate" for any Subsequent Dividend Period will
be the Applicable Percentage of the Reference Rate. The "Applicable Percentage"
will be determined based on the lower of the credit rating or ratings assigned
on such date to the Shares by Moody's and S&P (or if Moody's or S&P, or both,
shall not make such a rating available, the equivalent of either or both of such
ratings by a Substitute Rating Agency or two Substitute Rating Agencies or, in
the event that only one such rating shall be available, such rating) as follows:
<TABLE>
<CAPTION>
Credit Ratings
--------------
Applicable
Percentage of
Moody's S&P Reference Rate
--------------- ------------- --------------
<S> <C> <C>
"aa3" or higher AA- or higher 150%
"a3" to "a1" A- to A+ 200%
"baa3" to "baa1" BBB- to BBB+ 250%
Below "baa3" Below BBB- 275%
</TABLE>
provided, however, that, if at 9:00 A.M., New York City time, on any Auction
Date, (i) the rating of any Shares by Moody's shall be on the "Corporate Credit
Watch List" of Moody's with a designation of "downgrade" or "uncertain," (ii)
the rating of any Shares by S&P shall be on the "CreditWatch" of S&P with a
designation of "negative implications" or "developing" or (iii) if Moody's or
S&P, or both, shall not make such a rating available, the rating of any Shares
by any Substitute Rating Agency shall be on the substantial equivalent of clause
(i) or (ii) above, then the Maximum Applicable Rate for the Shares to which such
Auction Date relates will be determined pursuant to an Applicable Percentage
based on the credit rating that is one full level lower in the above table.
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<PAGE>
The Corporation shall take all reasonable action necessary to enable
Moody's and S&P (and, as appropriate, any Substitute Rating Agency or
Substitute Rating Agencies) to provide a rating for the Shares. If neither
S&P nor Moody's shall make such a rating available, the Corporation, after
consultation with the Broker-Dealers or their affiliates and successors, shall
select a nationally recognized statistical rating organization or two
nationally recognized statistical rating organizations to act as a Substitute
Rating Agency or Substitute Rating Agencies, as the case may be. If a
Substitute Rating Agency or Substitute Rating Agencies are not available, the
applicable rating shall be the highest rating last published by Moody's, S&P
or such Substitute Rating Agency or Substitute Rating Agencies.
(vii) "Order" has the meaning specified in paragraph 5(b)(i) below.
(viii) "Sell Order" has the meaning specified in paragraph 5(b)(i)
below.
(ix) "Shares" means the Shares subject to the related Auction
pursuant to this paragraph 5.
(x) "Submission Deadline" means 1:00 P.M., New York City time, on
any Auction Date or such other time on the Auction Date as may be specified by
the Auction Agent from time to time as the time by which each Broker-Dealer
must submit to the Auction Agent in writing all Orders obtained by it for the
Auction to be conducted on such Auction Date.
(xi) "Submitted Bid" has the meaning specified in paragraph 5(d)(i)
below.
(xii) "Submitted Hold Order" has the meaning specified in paragraph
5(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in paragraph 5(d)(i)
below.
(xiv) "Submitted Sell Order" has the meaning specified in paragraph
5(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in
paragraph 5(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in paragraph
5(d)(i) below.
(b) ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS. (i)
Beneficial owners and potential beneficial owners may only participate in
Auctions through their Broker-Dealers. Broker-Dealers will submit the Orders
of their respective customers who are beneficial owners and potential
beneficial owners to the Auction Agent, designating themselves (unless
otherwise permitted by the Corporation) as Existing Holders in respect of
Shares subject to Orders submitted or deemed submitted to them by beneficial
owners and as Potential Holders in respect of Shares subject to Orders
submitted to them by potential beneficial owners. A Broker-Dealer may also
hold Shares in its own account as a beneficial owner or wish to purchase
Shares for its own account as a potential beneficial owner. A Broker-Dealer
may thus submit Orders to the Auction Agent as a beneficial owner or a
potential beneficial owner and therefore participate in an Auction as an
Existing Holder or Potential Holder on behalf of both itself and its customers.
Prior to the Submission Deadline on each Auction Date:
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<PAGE>
(A) each Existing Holder may submit to its Broker-Dealer
information by telephone or otherwise as to:
(1) the number of Outstanding Shares, if any, held by
such Existing Holder which such Existing Holder desires to
continue to hold without regard to the Applicable Rate for the
next succeeding Subsequent Dividend Period;
(2) the number of Outstanding Shares, if any, held by
such Existing Holder which such Existing Holder desires to
continue to hold, provided that the Applicable Rate for the next
succeeding Subsequent Dividend Period shall not be less than the
rate per annum specified by such Existing Holder; and/or
(3) the number of Outstanding Shares if any, held by
such Existing Holder which such Existing Holder offers to sell
without regard to the Applicable Rate for the next succeeding
Subsequent Dividend Period; and
(B) each Broker-Dealer will contact Potential Holders by
telephone or otherwise to determine whether such Potential Holders
desire to submit Bids in which such Potential Holders will indicate the
number of Outstanding Shares, if any, which each such Potential Holder
offers to purchase, provided that the Applicable Rate for the next
succeeding Subsequent Dividend Period shall not be less than the rate
per annum specified by such Holder.
For the purposes hereof, the communication by an Existing Holder
pursuant to clause (A) above or by a Potential Holder pursuant to clause (B)
above to a Broker-Dealer, or the communication by a Broker-Dealer acting for
its own account to the Auction Agent, of information referred to in clause (A)
or (B) of this paragraph 5(b)(i) is hereinafter referred to as an "Order" and
each Existing Holder and each Potential Holder placing an Order, including a
Broker-Dealer acting in such capacity for its own account, is hereinafter
referred to as a "Bidder"; an Order containing the information referred to in
clause (A)(1) of this paragraph 5(b)(i) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause (A)(2) or
(B) of this paragraph 5(b)(i) is hereinafter referred to as a "Bid"; and an
Order containing the information referred to in clause (A)(3) of this
paragraph 5(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of its customers or itself, the
provisions herein relating to the consequences of an Auction for Existing
Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented thereby.
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Shares specified in such
Bid if the Applicable Rate determined on such Auction Date shall
be less than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding
Shares to be determined as set forth in paragraph 5(e)(i)(D) if
the Applicable Rate determined on such Auction Date shall be
equal to the rate per annum specified therein; or
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<PAGE>
(3) a lesser number of Outstanding Shares to be
determined as set forth in paragraph 5(e)(ii)(C) if such
specified rate per annum shall be higher than the Maximum
Applicable Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Shares specified in such
Sell Order; or
(2) such number or a lesser number of Outstanding
Shares to be determined as set forth in paragraph 5(e)(ii)(C) if
Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding Shares specified in such
Bid if the Applicable Rate determined on such Auction Date shall
be higher than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding
Shares to be determined as set forth in paragraph 5(e)(i)(E) if
the Applicable Rate determined on such Auction Date shall be
equal to the rate per annum specified therein.
(c) SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(i) Each Broker-Dealer shall submit in writing or through the
Auction Agent's auction processing system to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders obtained by such
Broker-Dealer for the Auction to be conducted on such Auction Date,
designating itself (unless otherwise permitted by the Corporation) as an
Existing Holder or a Potential Holder in respect of Shares subject to such
Orders, and specifying with respect to each Order:
(A) the name of the Bidder placing each Order (which shall be
the Broker-Dealer unless otherwise permitted by the Corporation);
(B) the aggregate number of Outstanding Shares that are the
subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding Shares, if any, subject
to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding Shares, if any, subject
to any Bid placed by such Existing Holder and the rate per annum
specified in such Bid; and
(3) the number of Outstanding Shares, if any, subject
to any Sell Order placed by such Existing Holder; and
20
<PAGE>
(D) to the extent such Bidder is a Potential Holder, the rate per
annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering in the aggregate all of the
Outstanding Shares held by an Existing Holder are not submitted to the Auction
Agent prior to the Submission Deadline for any reason (including the failure
of a Broker-Dealer to contact any Existing Holder or to submit an Order
covering such Existing Holder's Order or Orders), the Auction Agent shall deem
a Hold Order (in the case of an Auction relating to a Regular Dividend Period)
or a Sell Order (in the case of an Auction relating to a Special Dividend
Period) to have been submitted on behalf of such Existing Holder covering the
number of Outstanding Shares held by such Existing Holder and not subject to
Orders submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering
in the aggregate more than the number of Outstanding Shares held by such
Existing Holder are submitted to the Auction Agent, such Order shall be
considered valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder
shall be considered valid up to and including the number of Outstanding
Shares held by such Existing Holder; provided that if more than one Hold
Order is submitted on behalf of such Existing Holder and the number of
Shares subject to such Hold Orders exceeds the number of Outstanding
Shares held by such Existing Holder, the number of Shares subject to
each of such Hold Orders shall be reduced pro rata so that such Hold
Orders, in the aggregate, will cover exactly the number of Outstanding
Shares held by such Existing Holder;
(B) (I) any Bids submitted on behalf of such Existing Holder
shall be considered valid up to and including the excess of the number
of Outstanding Shares held by such Existing Holder over the number of
Shares subject to any Hold Order referred to in paragraph 5(c)(iv)(A)
above; (II) if more than one Bid submitted on behalf of such Existing
Holder specifies the same rate per annum and together they cover more
than the remaining number of Shares that can be the subject of valid
Bids after application of paragraph 5(c)(iv)(A) above and of subclause
(I) of this paragraph 5(c)(iv)(B) to any Bid or Bids specifying a lower
rate or rates per annum, the number of Shares subject to each of such
Bids shall be reduced pro rata so that such Bids, in the aggregate,
cover exactly such remaining number of Shares; and (III) subject to
subclauses (I) and (II) above, if more than one Bid submitted on behalf
of such Existing Holder specifies different rates per annum, such Bids
shall be considered valid in the ascending order of their respective
rates per annum and in any such event the number of Shares, if any,
subject to Bids not valid under this paragraph 5(c)(iv)(B) shall be
treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding Shares held by such
Existing Holder over the number of
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Shares subject to Hold Orders referred to in paragraph 5(c)(iv)(A) and
valid Bids referred to in paragraph 5(c)(iv)(B); provided that if more
than one Sell Order is submitted on behalf of any Existing Holder and
the number of Shares subject to such Sell Orders is greater than such
excess, the number of Shares subject to each of such Sell Orders shall
be reduced pro rata so that such Sell Orders, in the aggregate, cover
exactly the number of Shares equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum and
number of Shares specified.
(vi) Any Order submitted by a Existing Holder or a Potential Holder
to its Broker-Dealer and any Order submitted by a Broker-Dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.
(d) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE.
(i) Not earlier than the Submission Deadline on each Auction Date,
the Auction Agent shall assemble all Orders submitted or deemed submitted by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or
as a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding Shares over
the number of Outstanding Shares that are the subject of Submitted Hold
Orders (such excess being hereinafter referred to as the "Available
Shares");
(B) from the Submitted Orders whether the number of
Outstanding Shares that are the subject of Submitted Bids by Potential
Holders specifying one or more rates per annum equal to or lower than
the Maximum Applicable Rate exceeds or is equal to the sum of:
(1) the number of Outstanding Shares that are the
subject of Submitted Bids by Existing Holders specifying one or
more rates per annum higher than the Maximum Applicable Rate, and
(2) the number of Outstanding Shares that are subject
to Submitted Sell Orders
(if such excess or such equality exists (other than because the number
of Outstanding Shares in clause (1) above and this clause (2) are each
zero because all of the Outstanding Shares are the subject of Submitted
Hold Orders), such Submitted Bids by Potential Holders being
hereinafter referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per
annum specified in the Submitted Bids (the "Winning Bid Rate") that, if:
(1) each Submitted Bid from Existing Holders specifying
the Winning Bid Rate and all other Submitted Bids from Existing
Holders specifying lower
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rates per annum were rejected, thus entitling such Existing
Holders to continue to hold the Shares that are the subject of
such Submitted Bids, and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Potential Holders specifying lower rates per annum were
accepted, thus entitling the Potential Holders to purchase the
Shares that are the subject of such Submitted Bids, would result
in the number of Shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least
equal to the Available Shares.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 5(d)(i), the Auction Agent shall advise the Corporation
of the Maximum Applicable Rate and, based on such determinations, the
Applicable Rate for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable
Rate for the next succeeding Subsequent Dividend Period shall be equal
to the Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Outstanding Shares are the subject of Submitted Hold
Orders), that the Subsequent Dividend Period for such Shares next
succeeding the Auction shall automatically be a Regular Dividend Period
and the Applicable Rate for such next succeeding Subsequent Dividend
Period shall be equal to the Maximum Applicable Rate; or
(C) if all of the Outstanding Shares are the subject of
Submitted Hold Orders, that the Subsequent Dividend Period for such
Shares next succeeding the Auction shall automatically be a Regular
Dividend Period and the Applicable Rate for such next succeeding
Subsequent Dividend Period shall be equal to 59% of the Reference Rate
in effect on the date of such Auction.
(e) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF SHARES. Based on the determinations made pursuant to
paragraph 5(d)(i) the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Auction Agent shall take such other action as set
forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 5(e)(iii) and paragraph 5(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following order of
priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to sell the
Outstanding Shares that are the subject of such Submitted Sell Order or
Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be rejected, thus entitling each such Existing Holder to continue
to hold the Outstanding Shares that are the subject of such Submitted
Bid;
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(C) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted, thus requiring each such Potential Holder to purchase
the Outstanding Shares subject to such Submitted Bid;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be rejected, thus entitling each such Existing Holder to continue to
hold the Outstanding Shares that are the subject of such Submitted Bid,
unless the number of Outstanding Shares subject to all such Submitted
Bids shall be greater than the excess (the "Remaining Excess") of the
Available Shares over the number of Outstanding Shares subject to
Submitted Bids described in paragraph 5(e)(i)(B) and paragraph
5(e)(i)(C), in which event the Submitted Bids of each such Existing
Holder shall be accepted, and each such Existing Holder shall be
required to sell Outstanding Shares, but only in an amount equal to the
difference between (1) the number of Outstanding Shares then held by
such Existing Holder subject to such Submitted Bid and (2) the number
of Shares obtained by multiplying (x) the number of Remaining Excess by
(y) a fraction the numerator of which shall be the number of
Outstanding Shares held by such Existing Holder subject to such
Submitted Bid and the denominator of which shall be the sum of the
number of Outstanding Shares subject to such Submitted Bids made by all
such Existing Holders that specified a rate per annum equal to the
Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be accepted but only in an amount equal to the number of Outstanding
Shares obtained by multiplying (x) the difference between the Available
Shares and the number of Outstanding Shares subject to Submitted Bids
described in paragraph 5(e)(i)(B), paragraph 5(e)(i)(C) and paragraph
5(e)(i)(D) by (y) a fraction the numerator of which shall be the number
of Outstanding Shares subject to such Submitted Bid and the denominator
of which shall be the sum of the number of Outstanding Shares subject to
such Submitted Bids made by all such Potential Holders that specified
rates per annum equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding Shares are subject to Submitted Hold Orders),
subject to the provisions of paragraph 5(e)(iii), Submitted Orders shall be
accepted or rejected as follows in the following order of priority and all
other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Rate shall be rejected, thus entitling such Existing Holder to continue
to hold the Outstanding Shares that are the subject of such Submitted
Bid;
(B) the Submitted Bid of each Potential Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Rate shall be accepted, thus requiring such Potential Holder to purchase
the Outstanding Shares that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any
rate per annum that is higher than the Maximum Applicable Rate shall be
accepted and the Submitted
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Sell Orders of each Existing Holder shall be accepted, in both cases
only in an amount equal to the difference between (1) the number of
Outstanding Shares then held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and (2) the number of Shares
obtained by multiplying (x) the difference between the Available Shares
and the aggregate number of Outstanding Shares subject to Submitted
Bids described in paragraph 5(e)(ii)(A) and paragraph 5(e)(ii)(B) by
(y) a fraction the numerator of which shall be the number of
Outstanding Shares held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and the denominator of which
shall be the number of Outstanding Shares subject to all such Submitted
Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 5(e)(i)
or paragraph 5(e)(ii), any Existing Holder would be entitled or required to
sell, or any Potential Holder would be entitled or required to purchase, a
fraction of a Share on any Auction Date, the Auction Agent shall, in such
manner as it shall determine in its sole discretion, round up or down the
number of Shares to be purchased or sold by any Existing Holder or Potential
Holder on such Auction Date so that each Outstanding Share purchased or sold
by each Existing Holder or Potential Holder on such Auction Date shall be a
whole Share.
(iv) If, as a result of the procedures described in paragraph
5(e)(i), any Potential Holder would be entitled or required to purchase less
than a whole Share on any Auction Date, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, allocate Shares for
purchase among Potential Holders so that only whole Shares are purchased on
such Auction Date by any Potential Holder, even if such allocation results in
one or more of such Potential Holders not purchasing any Shares on such
Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of Outstanding Shares to be purchased and the aggregate number of the
Outstanding Shares to be sold by such Potential Holders and Existing Holders
and, to the extent that such aggregate number of Outstanding Shares to be
purchased and such aggregate number of Outstanding Shares to be sold differ,
the Auction Agent shall determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or
more sellers such Broker-Dealer shall receive, as the case may be, Outstanding
Shares.
(f) SUSPENSION OF AUCTION DURING NON-PAYMENT PERIOD. Upon
occurrence and during the continuance of a Non-Payment Period with respect to
the Shares that has not been duly cured by the Corporation pursuant to
paragraph 2(b), Auctions of such Shares shall be suspended and shall not
resume in each case until (A) in the case of a Dividend Non-Payment Period,
all accumulated and unpaid dividends on such Shares for all past Dividend
Periods shall have been paid to the Auction Agent, or (B) in the case of a
Redemption Non-Payment Period in connection with an Optional Redemption of
less than all of the Shares, all amounts payable upon such Optional Redemption
of such Shares shall have been paid to the Auction Agent, in each case by
12:00 noon, New York City time, on the relevant Auction Date with respect to
such Shares, provided that, at least two Business Days but no more than 30
days prior to such Auction Date, the Corporation shall have given the Auction
Agent, the Securities Depository and the applicable holders of record written
notice of such deposit or availability.
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(g) MISCELLANEOUS. The Corporation may interpret the provisions of
this paragraph 5 to resolve any inconsistency or ambiguity, remedy any formal
defect or make any other change or modification that does not substantially
adversely affect the rights of Existing Holders of Shares. An Existing Holder
(A) may sell, transfer or otherwise dispose of Shares only pursuant to a Bid
or Sell Order in accordance with the procedures described in this paragraph 5
through a Broker-Dealer, except that transfers of Shares may also be effected
through means other than pursuant to Auctions provided that each such transfer
shall be valid and accepted by the Auction Agent only if such Existing Holder
or its Broker-Dealer or Participant, as applicable, shall have advised the
Auction Agent in writing of such transfer by 3:00 P.M. on the Business Day
next preceding the Auction Date with respect to such Shares, and (B) except as
otherwise required by law, shall have the ownership of the Shares held by it
maintained in book-entry form by the Securities Depository in the account of
its Participant, which in turn will maintain records of such Existing Holder's
beneficial ownership. Neither the Corporation nor any Affiliate shall submit
an Order in any Auction. Any Existing Holder that is an Affiliate shall not
sell, transfer or otherwise dispose of Shares to any Person other than the
Corporation. All of the Outstanding Shares shall be represented by one or
more certificates registered in the name of the nominee of the Securities
Depository unless otherwise required by law or unless there is no Securities
Depository. If there is no Securities Depository and during any Non-Payment
Period for any Shares, at the Corporation's option and upon its receipt of
such documents as it deems appropriate, such Shares may be registered in the
share register in the name of the Existing Holder thereof and such Existing
Holder thereupon will be entitled to receive certificates therefor and
required to deliver certificates therefor upon transfer or exchange thereof.
6. CONVERSION AND EXCHANGE. The Holders of the Shares shall not
have any rights to convert such shares into, or to exchange such shares for,
shares of Common Stock, any other class or classes of capital stock (or any
other security) or any other series of any class or classes of capital stock
(or any other security) of the Corporation.
7. SINKING FUND. No sinking fund shall be provided for the
purchase or redemption of the Shares.
8. MISCELLANEOUS. The Board of Directors may interpret the
provisions hereof to resolve any inconsistency or ambiguity which may arise or
be revealed and if such inconsistency or ambiguity reflects an inaccurate
provision hereof, the Board of Directors may, in appropriate circumstances,
authorize the filing of articles of correction pursuant to Texas law.
9. CHANGE IN NUMBER OF SHARES. The Board of Directors may increase
or decrease the number of shares of this series of Preference Stock subsequent
to the issue of shares of this series, but not below the number of shares of
Preference Stock then Outstanding.
10. NOTICES. All notices or communications to the Corporation,
unless otherwise specified in the Bylaws of the Corporation or this Statement
of Resolution, shall be sufficiently given if in writing and delivered or
mailed by first-class mail, postage prepaid, to the Corporation at its
principal executive offices at Energy Plaza, 1601 Bryan Street, Dallas, Texas
75201, attention: Treasurer. Notice to the Corporation shall be deemed given
on the earlier of the date received or the date seven days after such notice
is mailed.
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11. SECURITIES DEPOSITORY; STOCK CERTIFICATES. (a) If there is a
Securities Depository, one or more certificates for all of the Shares shall be
issued to the Securities Depository and registered in the name of the
Securities Depository or its nominee. Additional certificates may be issued
as necessary to represent Shares. All such certificates shall bear a legend
to the effect that such certificates are issued subject to the provisions
restricting the transfer of Shares contained in this Statement of Resolution.
Except as provided in paragraph (b) below, the Securities Depository or its
nominee will be the holder, and no Existing Holder shall receive certificates
representing its ownership interest in such Shares.
(b) If the Applicable Rate applicable to the Shares shall be the
Non-Payment Period Rate or there is no Securities Depository, the Corporation
may at its option issue one or more new certificates with respect to such
Shares (without the legend referred to in paragraph (a) above) registered in
the names of the Existing Holders or their nominees.
Dated: June 16, 2000 TXU CORP.
By: /s/ Diane J. Kubin
---------------------------
An Authorized Officer
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